Huawei Australia sees 5G ban start to bite as carrier business down 21% for 2019
The Australian arm of the Chinese networking vendor Huawei has reported a steep decline in its net profit after tax for the full year to 31 December 2019 and is blaming the Australian government's decision to ban the company from participating in 5G rollouts for it.
Huawei Australia recorded profit after tax of AU$6.43 million, a 78% decline from the AU$29.3 million that was reported during the 2018 financial year.
"Current year financial performance has been affected by the Australian federal government's announcement in 2018 around the 5G rollout," director Zhidong Xu wrote.
"The adverse impact on the company's financial performance from this announcement will continue in the subsequent years, which is likely to result in a decline in the company's profitability."
Total revenue for Huawei Australia was AU$657 million, down 10% from AU$735 million. Of that, carrier contracts accounted for AU$460 million, down 21% from AU$581.5 million; consumer purchases came in at AU$148 million, an improvement on last year's AU$119 million. Enterprise contracts was also up AU$49.5 million from AU$34 million last year.
Pre-tax profits were AU$33.8 million, only slightly down from AU$38.7 million on last year.
Income tax paid during the year came to AU$27 million, up from the AU$9.35 million from last financial year. Of that, there was deferred tax of AU$21 million. Although, nearly AU$16.8 million of it was derecognised, which Huawei said was as a result of "a revision to the company's taxable income forecast".
Looking ahead, the company said it will"continue to pursue its objective of increasing its profitability during the next financial year, with particular focus on the enterprise and consumer business. However, the scale and growth in the carrier network business will reduce as a result of the 5G government announcement in 2018".
Earlier this year, Home Affairs Minister Peter Dutton dismissed talk of revisiting the ban that was slapped on Huawei.
"They are a high risk vendor. We have been very clear about it," Dutton said, in an interview with the Today Show at the time.
As a result of ban, Huawei believes up to a total of 1,500 jobs will go by the end of this year, after having cut 100 from its workforce last August.
According to its report, Huawei Australia employs 258 people, with wages and salaries steady at AU$47.5 million for 2019.
The UK made the decision to not allow Huawei in the core, and the Chinese company's radio equipment will be restricted to only 35% of its network. Additionally, Huawei equipment will not be used at sensitive locations such as nuclear sites and military bases.
"The government is certain that these measures, taken together, will allow us to mitigate the potential risk posed by the supply chain and to combat the range of threats, whether cybercriminals, or state-sponsored attacks," the UK decision said.
Huawei Australia paid out AU$7.2 million in dividends over 2019, the company did not pay dividends in 2018.
Huawei Australia is controlled by Huawei Technologies Cooperatief incorporated in the Netherlands, with the ultimate parent company being Huawei Investment and Holding Co incorporated in China.
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